Henderson Opportunities Share Discussion Threads

[praipus] 04/3/2005 09:37

Chasdot sorry to be thick but whats do you mean by prints ot timed prints?

[praipus] 04/3/2005 09:29

Nice rise MM still looking for stock. Must be a big buyer or a lot of them.

[chasdot] 04/3/2005 09:26

better
classic liquidity problem with aim stocks, a seller comes in and the price drops from 21 to 12. now we've got the bounce.. perhaps there are sellers at 16 where it last tried to rally.
no real prints yet today though, hopefully a few timed prints later..

[praipus] 03/3/2005 12:45

chasdot - think your right offers gone to 14p.

[chasdot] 03/3/2005 11:16

think the market's been left a small short, hence they're bidding for a few extra. potential 2p rise if buyers come in maybe??

[praipus] 03/3/2005 09:13

Can anyone tell me has the Bid/Offer size always been larger on the bid size?

The graph looks bearish but the MM's action looks bullish. Large trades yesterday, presenting to analysts all seems to be sunlight and smiles.

Agressive aquisition and write down policy so very attractive for a bidder or at least no nasty surprises for the shareholders later.

This is good news isnt it?

[praipus] 02/3/2005 09:12

MM short of stock, bid size much larger than offer. Good time to buy IMHO.

[glasshalfull] 01/3/2005 17:24

Daz

Good post.

I agree entirely with your thoughts on improving cashflow and would also add that both the interview and accounts suggested an improvement in margins which will also help alleviate any problems.

I'm led to believe that invoice discounting/factoring (£1.7M) is a cheaper option than running an overdraft and this is almost covered by the £1.6M cash on the balance sheet.

This leaves a bank loan of £500k payable this year and convertible loan note as discussed to death.

IMO there are no worries concerning the balance sheet at this time.

My main concern would be if they made a significant acquisition or a series of smaller ones at present and how they would propose funding it. I much prefer consolidation especially with 40% organic growth in the online business.

On a personal note I averaged down at 11.72p today.
I hope this isn't the kiss of death.......


Regards

A much happier

Glasshalfull (rather than the fool I felt yesterday!)

[mdchand] 01/3/2005 16:45

looks like that overhang has also gone - 2m buy seems to have cleared it. lots of mm buys and t-trades seem to confirm this. an institution must be nibbling. wonder who?

[james t kirk] 01/3/2005 16:09

Well the broker briefings must be going well.

[daz] 01/3/2005 12:21

Glasshalffull

Thanks for the links to the interview, which I wasn't aware of and for the reference to note 8, which I had missed. It says that it can be converted into shares at the option of the note holder (not the company). So for now, I think it's right to assume that it will be repaid in cash, so the debt figure is 5m.

As you say, the loan notes are not due to be repaid until 2009, leaving plenty of time for the shares to rise above the 21.35p conversion price, which if current growth rates continue ought to be achieved. However if things go awry, the company could find itself in difficulty, a risk which needs to be borne in mind but hopefully won't happen.

Do you have any specific reasons for believing that the cash flow will improve this year? From reading the report again, I came up with the following:

Rationalising the branch network
Use of technology to reduce costs: sharing infrastructure etc.
Improvements in education recruitment revenues
Exceptional costs will not recur (but maybe replaced by new ones)

[glasshalfull] 28/2/2005 21:44

Daz

I appreciate your response.

I've done an awful lot of digging this afternoon.

My initial realisation was that I had made a wrong investment decision - down 13% in a matter of hours!!!! - which as you can imagine was extremely frustrating, especially when I had carried out my usual "careful" analysis.

Before I go any further I would recommend anybody interested in HOT as an investment to listen or watch the Tony Reeves interview which can be accessed via the company web site or directly at Cantos. It lasts approx. 8 minutes.

The following links should help




or




He basically reiterates that the Education arm is back performing at Sept 2004 levels (since the beginning of the 2005 financial year) and anticipates growth for the remainder of this year and beyond.

I would suggest that he is fairly bullish on all aspects of the company, especially the organic growth from the online side of the business, and maintains that the company have senior debt facility in place to meet any opportune acquisition - hardly the statement from a company with financial problems !

According to todays UK Analyst email, the Education side had dragged down the shareprice.

I looked closely at the cash flow figures, which to be honest aren't great, but do show a £37k inflow from operating activities before tax, interest, etc.

IMO this figure should increase dramatically in 2005.
With the expotential growth in 2004 - Turnover up from £2M to £37M - and the bedding in of 10 acquisitions, it was always going to take its toll on the cashflow.

I agree with Daz in that we should carefully watch this figure but the company did have cash in the bank of £1.6M at year end, although overall net debt is £5.07M.

Note 8 in the accounts - Creditors falling due after more than 1 year - clearly lays out the terms of the loan note, 8% interest payable quarterly (£80k) with the capital to be redeemed in Sept 2009 or converted into an 18M shareholding in the company at a conversion rate of 21.35p. So the current share price requires to almost double from here and thus no dilution of the equity, for instance, at todays low share price.

Having re read todays statement, watched the interview (several times.....sad I know !) double checked my initial analysis, I'm more convinced of the company as a decent investment....especially at the NEW LOWER PRICE.

My initial concern a few months back was simply the impact of 10 acquisitions in such a short time frame and possibly overpaying for Workthing...£6M for a company that had announced a £3M loss seemed overly expensive to me.
This was probably the main reason that I decided to wait for the full year figures before investing.

As a comparison the online agency Jobsite was bought for £36 million by Associated Newspapers in 2004.
With Guardian Media Group investing an estimated £44M in Workthing prior to its sale it certainly puts a different slant on the acquisition.

Anyway, I've wittered on long enough.

I will monitor the company during the next few days, especially with the admission of a further 3.5m shares on 3rd March, with a view to adding or should I say, averaging down.

Glad I didn't invest my pennies all at once.


Regards

A hurting (but not yet out) Glasshalfull

[r0ger moore] 28/2/2005 21:10

cash call coming up next this stock is to hot to handle

[daz] 28/2/2005 20:54

Glasshalfull

Sorry about the delay in replying but I've had some of the family around this evening.

The results today didn't mention the loan notes are convertible, so I assumed that they weren't.

I've now checked the Workthing announcement, which does confirm that the loan notes are convertible but doesn't mention the terms of conversion or who decides the method of conversion, although usually it is the company.

So I think you're probably right and I've made an honest mistake when quoting the net debt figure in note 10 and not allowed for the fact that the loan notes may be converted into shares and therefore not be repayable in cash.

This would reduce debt from 5m to 1m but still leaves the company with poor cash flow. So the situation is not as bad as I thought but I would still say not healthy.

Thanks for pointing that out as it's a very important point and sincere apologies to all for making things look worse than they are but in my defence I would say that both announcements are far from clear.

Also the announcement today or the interims don't mention the senior debt facility you refer to above, so I will have to take your word on that as well.

Going forward, I would hope that the company can wring out further operational efficiencies, to improve cash flow. I think it's only fair to give the company the benefit of the doubt as the management are experienced and the recovery in the education market ought to improve things as well but companies which make lots of acquisitions are always more risky and the company still have something to prove IMO.

Thanks again for your post.

Daz

[glasshalfull] 28/2/2005 16:18

Daz

I've read your posts with interest.

I'm attempting to reconcile the cash problem you are indicating but don't understand what you mean exactly.

Prior to their acquisition of Workthing the company had net cash,
the purchase costing them £6M cash.

This £6M was partly funded by a £4M convertible loan note which is re payable in either 5 years or can be converted by the issuing of shares at a coversion price of 21.35p.

Note 10 in the statement states that debt repayable this year is £500k which I'm not unduly worried about.

In Tony reeves interview he states:-

"We would not be happy to issue shares for an acquisition at today's price because we think we are undervalued. But now we do have a senior debt facility that is in place, and I think that is enough for us, for any future acquisitions that might come up."

So, I unsure as to what cash problems you see and that i'm unaware of.

The timing of my buy was dreadful to say the least but I still believe that HOT are a good investment over the short and medium term.

I thankfully invested only a small amount but now think the risk/reward even better.

I'd be grateful if you could clarify your comments before i sink more into this.


Regards

Glasshalfull

[daz] 28/2/2005 15:59

JTK

In a way they are because the cash position is dire, you can't run a company on that basis.

The company haven't mentioned the cash problem let alone identify steps to address it. The company is IMHO at risk, if they can't raise further capital and if they do ahead existing holders stand to be diluted. Hardly a back drop to expect the share price to rise - I'm not surprised it's falling.

[james t kirk] 28/2/2005 13:42

Drop just got bigger, anyone would have thought results were rubbish.

[mdchand] 28/2/2005 13:00

jtk - looks like no institutional buying offsetting the sales today, hence drop although this may change later this week. pa if you fancy a short term punt, have a look at CTV travel (epic CNG).

[james t kirk] 28/2/2005 12:29

Big drop now, very harsh considering.

[mdchand] 28/2/2005 11:52

CS broker note issued today........no analysis of interims, but this will happen. Will post as soon as i receive. However, hotshot are doing the institutional rounds 1st,2nd, 3rd march (see below)

Companies available to meet you:

AGA Foodservice – 24th March

Emblaze – 16th March

Entertainment Rights – 15th to 18th March

Erinaceous – 16th, 24th & 29th March, London. 23rd March, Scotland

Evolutec – 2nd, 3rd & 4th March

Hot Group – 1st March, Scotland. 2nd & 3rd March London

Lambert Howarth – 17th to 22nd March

Manganese Bronze site visit to Coventry – 22nd March

PD Ports site visit to Middlesbrough & Hartlepool – 15th March

PFI Co. – 21st to 23rd March

Raymarine – 1st to 3rd March, London. 4th March, Scotland




--------------------------------------------------------------------------------

We are currently active in the following stocks:



Biofuels

East Surrey

Hamworthy

Manganese Bronze

[james t kirk] 28/2/2005 11:26

I've reduced my holding a bit as I feel that this isn't going to rise with Numis firmly in a sell position. Level 2 has weakened too, now 2v2.

Still see plenty of upside but there are some financial issues that need resolving.

[daz] 28/2/2005 10:52

Careful chaps, cashflow is a problem. Quoting operating cashflow before interest, tax and acquisitions is selective presentation on the companys part at its worst.

The company is 5m in debt (see note 10) and with a substantial cash outflow. The company is going to need to raise fresh capital just to keep the operation afloat let alone make further acquisitions. The shares aren't going anywhere until the re-financing is announced and that will be at a discount to the prevailing price. Institutions have no reason at all to buy shares now, when they will be offered shares at a discount in the near future.

The balance sheet is also made up nearly entirely of intangibles, which isn't going to impress any lender.

Daz

[mdchand] 28/2/2005 09:29

im sure CS will be commmenting on these in their daily smaller cap email. lets see how loudly they bang the drum - and whether they have a lot of institutional meeting this week. Of course, some nice director buying wouldnt go amiss - lets see whether that happens this week.

[james t kirk] 28/2/2005 09:17

Welcome aboard, yup I think anyone here is probably surprised at lack of action on share price. Mainly buys today too, so hopefully Numis will wake up soon and move off offer.

[glasshalfull] 28/2/2005 09:04

Hi

I've been a keen follower of this BB over the last couple of weeks and decided to wait until the results before posting or investing.

Agree that these are great results, so much so that I took the plunge this morning.

Got to say that I was extremely suprised that they weren't at a premium at the opening.

With EBITDA of £2.7M, Adj EPS 1.42p and Turnover of £43M, all way ahead of expectations - in fact they almost achieved the 2005 figures !! - I think HOT is significantly undervalued.

Anyway, glad to join the party.


Regards

Glasshalfull